Tesla is making another leap to shed its EV maker title and transform into a full-fledged physical AI outfit.
The theme of Wednesday’s fourth-quarter earnings call heavily centered on how Tesla is investing in its future as an AI and robotics company — a narrative CEO Elon Musk has pushed for some time now.
The bets included: a major investment in Musk’s xAI, updates on the Optimus humanoid robot, and a renewed push for in-house chipmaking. Musk projected that Tesla’s future will require a $20 billion investment, which dwarfs the company’s $8.5 billion in capex reported for the 2025 fiscal year.
Meanwhile, Tesla’s automotive segment took a back seat: Musk said he’s killing the Model S and Model X to free up room for humanoid robot production. And while Tesla’s energy and “services” revenue jumped 25% and 18%, respectively, auto revenue fell 11% year-over-year — a clear indication that the quarter’s growth came from everywhere but its core EV business.
“We’ve updated the Tesla mission to amazing abundance, and this is an attempt to send a message of optimism about the future,” Musk said during the call.
The company’s stock rose 1.7% after the market closed on Wednesday evening.
Here are 6 biggest takeaways from the earnings call.
Tesla invests $2 billion into xAI
Tesla made good on its pledge to investors and announced a $2 billion investment into xAI, the startup behind Grok. It’s part of a larger $20 billion Series E funding round from January.
The expectation of the investment is a deeper collaboration between the two companies. xAI, which has been expanding its data center footprint, could provide the compute and other technical capabilities to further advance Tesla’s autonomous vehicle and robotics agenda.
Vaibhav Taneja, Tesla’s chief financial officer, said during the call that the agreement with xAI is in the spirit of finding “efficient ways for others to help us.”
Musk kills the Model S and Model X
In a surprise move, Musk announced that production of the Model S and Model X would be discontinued by the next quarter, closing a chapter on the company’s premium SUV and sedan.
That leaves the EV maker with four cars: the Cybertruck, the more popular Model 3 and Model Y, and the yet-to-be-released Cybercab.
The CEO said during the call that the move will provide more production space in Tesla’s Fremont factory for Optimus robots.
The “long-term goal” is to produce a million units a year with the freed-up space, Musk said.
The CEO added that killing the Model S and Model X is part of Tesla’s “overall shift to an autonomous future,” which includes the company’s ride-hailing service, Tesla Robotaxi, and autonomy in personally owned vehicles through Full Self-Driving, an advanced driver assistance system.
Tesla expects to start production of the Cybercab, a two-seater coupe, in April for eventual integration into its Robotaxi fleet.
Robotaxi gets more expansion targets
Tesla revealed where it aims to expand the Robotaxi ride-hailing service in the first half of 2026 — Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas — but has yet to announce when it will remove the safety monitors inside the cars for public riders across Austin and San Francisco Bay Area, where the service now operates.
Musk said that FSD — the technology that Tesla says will make personally owned vehicles fully autonomous — is already “100% unsupervised” and operating without humans inside. The difference, he said, is that Tesla is being “very cautious” with rolling out unsupervised service to the public, though Tesla began offering a limited number of unsupervised rides in Austin this month.
“There’s like some pretty nutty intersections, where there are a lot of humans who make mistakes and have accidents in various cities,” Musk said. “So we want to make sure that FSD can handle those unusual intersections.”
Musk wants to go deeper into chips
There wasn’t much of a progress report on Tesla’s AI5 chip, but the CEO said he’s spending part of his weekends working on it.
“If I’m spending my Saturdays on something, it’s going to be something pretty important,” Musk said, adding that chip procurement is “existential” for Tesla’s future, going so far as to bring up the Tesla “Terafab” — his aspirational idea of building an in-house chip manufacturing plant.
Musk said he wants to build a factory that integrates “logic, memory, and packaging” because Tesla will be “fundamentally limited by supply chain” if it doesn’t.
Optimus is still in ‘R&D phase’
Musk said he expects to unveil an Optimus 3 robot in a “few months,” but don’t expect it to be working the assembly lines just yet.
The CEO said Optimus isn’t contributing to Tesla’s manufacturing work in any “material way” and that the humanoid robot is only in the factory for training purposes.
The fundamentals were still crucial for Q4
Musk talked a lot about Tesla’s future, but the company’s fourth-quarter performance still hinged on its tangible businesses, such as its energy segment, which includes the Megapack, a utility-scale battery system, and the Powerwall, the home battery system.
“On the energy front, we achieved yet another record in terms of gross profits for the quarter and ended the year with nearly $12.8 billion in revenue,” Taneja, the Tesla CFO, said.
Tesla also announced this month that it will pivot FSD to a subscription-based only model starting in February. Customers previously had the option to buy FSD upfront for $8,000.
The move is a clear signal that Tesla sees FSD as a key future revenue generator.
Automakers are increasingly betting that software subscription services will be a critical source of recurring revenue with higher margins. General Motors revealed that its vehicle software generated $2 billion in the past nine months.
Tesla did not respond to a request for comment.
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